Push to regulate development levies

Greater standardisation and equitable sharing of bulk infrastructure costs between developers and municipalities is urgently needed, say developers.

A recent seminar hosted by the Swiss government funded Vuthela iLembe LED Support Programme, brought together government officials, developers and the business sector, who have expressed varying and often conflicting views on how development charges should be levied.

A development charge is levied by a municipality to cover the costs incurred when installing new infrastructure, or upgrading existing infrastructure of new developments.

With the introduction of the Municipal Fiscal Powers and Functions Amendment Bill in Parliament last month, it is necessary that key industry stakeholders that will be impacted by the imminent law, find common ground.

The Bill is likely to be enacted into law early next year, and all municipalities will have to comply with its requirements.

Representatives of iLembe District municipalities (IDM), the South African Property Owners Association, developers, the iLembe Chamber of Commerce, Industry and Tourism, Siza Water, the departments of transport and finance and development facilitation practitioners attended the seminar.

There was general consensus that developers pay towards bulk services such as water, electricity, roads and sanitation systems. But stakeholders differed on how the principle was being applied, and the conditions for and calculations to apportion such costs.

Challenges included concerns that the rationale for development charges were not fully understood by all stakeholders, and the calculation formula was not standardised among the family of local municipalities in the IDM.

iLembe Chamber of Commerce and Tourism CEO, Cobus Oelofse, said developers were concerned that the cost burden of installing infrastructure was shifting to end users, and that development charges were like a form of tax on new projects.

The Chamber proposed other opportunities to secure funding for bulk infrastructure should be explored jointly by developers and municipalities.

Developer contributions should be capped, rates and rebates holidays should be offered to developers as incentives, and development charges should be ring-fenced for the installation of new bulk infrastructure only and not for maintenance and replacement of faulty equipment.

Development facilitation consultant Frikkie Brooks stressed that the process of implementing development charges should focus on achieving a win-win outcome for all parties.

“Municipalities need to increase revenues by expanding their rates base and the scale of the services they provide, and private developers can help municipalities to achieve this,” said Brooks.

SA Property Owners Association CEO, Neil Gopal, said the industry did not oppose development charges, provided they were applied in a fair and transparent manner.

Vuthela iLembe LED Support Programme spokesperson, Richard Clacey, said the seminar had succeeded in bringing stakeholders together to robustly engage around the issue to better understand each other’s concerns.

“We have an opportunity to do something special here in the iLembe district municipality,” said Clacey.

“If developers and municipalities put their heads together and agree on a way forward, we can all succeed. That way, everybody wins, and everybody has a future in this region.”

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